"2013 was the year of the network," said Randall Stephenson, AT&T
chairman and CEO. "With Project VIP, we're delivering faster speeds and
new services to millions more customers. And growth on these platforms
is going strong. We exceeded build targets across the board. Our 4G
LTE network is nearly complete and is the nation's most reliable
with lightning-fast speeds. U-verse is rapidly expanding, and our
fiber-to-the-business build is off to a fast start.

"The next steps are to make our networks even more powerful and layer on
services that will drive new growth in the years ahead. We have good
momentum in areas like connected car, home automation and mobile
business solutions. We're also committed to transforming our operations
to make them more responsive and efficient. To that end, we've launched
Project Agile, a broad set of initiatives to streamline and improve
every part of our business. Execution has begun and will be a focus area
for us in 2014 and beyond."

Fourth-Quarter Financial Results

For the quarter ended December 31, 2013, AT&T's consolidated revenues
totaled $33.2 billion, up 1.8 percent versus the year-earlier period.
Compared with results for the fourth quarter of 2012, operating expenses
were $20.9 billion versus $38.5 billion; operating income was
$12.2 billion compared to a loss of $6.0 billion; and operating income
margin was 36.9 percent compared to (18.3) percent. Adjusted operating
expenses were $28.0 billion, compared to an adjusted $28.4 billion in
the year-ago quarter, down 1.4 percent; operating income was $5.2
billion versus $4.2 billion a year ago; and operating income margin was
15.5 percent, up from 12.9 percent last year.

Fourth-quarter 2013 net income attributable to AT&T totaled
$6.9 billion, or $1.31 per diluted share, compared to $(3.9) billion, or
$(0.68) per diluted share, in the year-earlier quarter. Adjusting for
$0.89 from the non-cash actuarial gain on benefit plans and $(0.11) from
other significant items (which included charges of $0.07 from debt
redemption costs and $0.06 from employee separations, and a $0.02 gain
from the sale of América Móvil shares), earnings per share was $0.53
compared to an adjusted $0.44 in the year-ago quarter, an increase of
20.5 percent.

For full year 2013, compared with 2012 results, AT&T's consolidated
revenues totaled $128.8 billion versus $127.4 billion; when excluding
the divested Advertising Solutions business unit, revenues were up 1.9
percent for the year. Operating expenses reflect actuarial gains on
benefit plans and were $98.3 billion, compared with $114.4 billion, down
14.1 percent; net income attributable to AT&T was $18.2 billion versus
$7.3 billion; and earnings per diluted share was $3.39, compared with
$1.25 in the prior year. With adjustments for both years, earnings per
share totaled $2.50, compared with $2.31, an increase of 8.2 percent.

As part of its Project VIP-related LTE deployment, the company now
covers nearly 280 million POPs. The company's LTE deployment is expected
to be substantially complete by this summer.

Share Repurchases

During the quarter, the company repurchased 54 million of its shares for
$1.9 billion. In 2013, the company repurchased 366 million shares, or
more than 6 percent of outstanding shares, for $13.0 billion. The
company expects to make future repurchases opportunistically.

Outlook

AT&T is on track to deliver the financial targets laid out with Project
VIP. It expects solid revenue and earnings per share growth with stable
margins while returning substantial value to shareowners.

In 2014, AT&T expects continued consolidated revenue growth in the 2 to
3 percent range, including strength in wireless service and wireline
consumer revenues. The company also expects stable consolidated margins
with continued improvement in wireless margins helping offset Project
VIP pressure in wireline. Adjusted earnings per share growth is expected
to be in the mid-single digit range excluding any impact from future
share buybacks.

AT&T expects capital expenditures in the $21 billion range. Free cash
flow is expected to be in the $11 billion range.

2014 outlook assumes no lift from the economy and excludes adjustments
such as non-cash mark-to-market benefit-plan adjustments. It also
excludes any impact from the planned acquisition of Leap Wireless.

Wireless Service Revenues Grow 4.8 Percent. Total wireless
revenues, which include equipment sales, were up 4.5 percent year over
year to $18.4 billion. Wireless service revenues increased 4.8 percent
in the fourth quarter to $15.7 billion. Wireless data revenues increased
16.8 percent from the year-earlier quarter to $5.7 billion.
Fourth-quarter wireless operating expenses totaled $14.5 billion, down
3.9 percent versus the year-earlier quarter, and wireless operating
income was $3.9 billion, up 53.8 percent year over year.

Smartphones and Tablets Drive Postpaid Growth. AT&T posted a net
increase in total wireless subscribers of 809,000 in the fourth quarter.
Subscriber additions for the quarter included postpaid net adds of
566,000. Postpaid net adds include 299,000 smartphones. Total branded
smartphone net adds (both postpaid and prepaid) were 529,000. Total
branded tablet net adds were 440,000.

Connected device net adds were 398,000. Prepaid had a net loss of 32,000
subscribers primarily due to declines in session-based tablets; however,
prepaid revenues increased both year over year and sequentially.
Reseller had a net loss of 123,000 subscribers primarily due to losses
in low-revenue 2G subscriber accounts.

Record-Low Fourth-Quarter Postpaid Churn. The company had its
lowest-ever fourth-quarter postpaid churn of 1.11 percent compared to
1.19 percent in the year-ago quarter. Total churn was stable at 1.43
percent versus 1.42 percent in the year-ago quarter. The strength of the
network helped drive lower churn. About 90 percent of postpaid
subscribers are on Mobile Share, FamilyTalk® or business
plans, all of which have significantly lower churn than other postpaid
subscribers.

Smartphones Reach Record 93 Percent of Phone Sales. AT&T added
1.2 million postpaid smartphones
in the fourth quarter. At the end of the quarter, 77 percent, or
51.9 million, of AT&T's postpaid phone subscribers had smartphones, up
from 70 percent, or 47.1 million, a year earlier. The company sold
7.9 million smartphones in the quarter. More than 1 million of those
smartphone sales were on the new AT&T Next program. Smartphones
accounted for a record 93 percent of postpaid phone sales in the
quarter. AT&T's ARPU for smartphones is twice that of non-smartphone
subscribers. More than half of AT&T's postpaid smartphone customers now
use an LTE device, and 77 percent use a 4G-capable device (LTE/HSPA+).

Mobile Share Passes 21 Million Connections. Mobile Share plans
now represent more than 21 million connections, or about 29 percent of
postpaid subscribers. The number of Mobile Share accounts reached 7.1
million in the fourth quarter with an average of about three devices per
account. Take rates on the higher-data plans continue to be strong with
30 percent of Mobile Share accounts choosing 10 gigabyte or higher plans.

The number of subscribers on usage-based data plans (tiered data and
Mobile Share plans) continues to increase. About 73 percent, or
37.7 million, of postpaid smartphone subscribers are on usage-based data
plans. This compares to 31.7 million a year ago. About 80 percent of
customers on usage-based data plans have chosen the medium- and
higher-data plans: 24 percent have chosen the higher plans, compared to
13 percent in the year-ago quarter.

Wireless Margins Expand. Wireless margins reflect lower
year-over-year smartphone sales and upgrades, further revenue gains from
the company's growing high-quality smartphone subscriber base and the
impact from AT&T Next. AT&T's fourth-quarter wireless operating income
margin was 21.4 percent versus 14.5 percent in the year-earlier quarter.
AT&T's wireless EBITDA service margin was 37.4 percent, compared with
29.1 percent in the fourth quarter of 2012. (EBITDA service
margin is operating income before depreciation and amortization, divided
by total service revenues.)

Wireline Revenues Up Sequentially. Total fourth-quarter wireline
revenues were $14.7 billion, down 1.4 percent versus the year-earlier
quarter and up 0.3 percent sequentially. Wireline service revenues were
down 0.7 percent year over year. Total U-verse revenues grew
27.9 percent year over year and were up 7.0 percent versus the third
quarter of 2013. Fourth-quarter wireline operating expenses were
$13.3 billion, up 1.0 percent versus the fourth quarter of 2012. AT&T's
wireline operating income totaled $1.5 billion, down 18.8 percent versus
the fourth quarter of 2012. Fourth-quarter wireline operating income
margin was 9.9 percent, down versus 12.0 percent in the year-earlier
quarter, primarily due to declines in voice revenues, success-based
growth, U-verse content costs and costs incurred as part of Project VIP.

Consumer Revenues Increase 2.9 Percent. Revenues from residential
customers totaled $5.6 billion, an increase of 2.9 percent versus the
fourth quarter a year ago and up 1.3 percent sequentially. Continued
strong growth in consumer IP data services in the fourth quarter more
than offset lower revenues from voice and legacy products. U-verse,
which includes TV, high speed Internet and voice over IP, now represents
57 percent of wireline consumer revenues, up from 46 percent in the
year-earlier quarter. Consumer U-verse revenues grew 26.8 percent year
over year and were up 6.8 percent versus the third quarter of 2013.

Record-Low U-verse TV Churn. Total U-verse subscribers (TV and
high speed Internet) reached 10.7 million in the fourth quarter. U-verse
TV had the lowest-ever churn in its history. U-verse TV added
194,000 subscribers in the fourth quarter with an increase of 924,000
for the full year to reach 5.5 million in service. AT&T has more pay TV
subscribers than any other telecommunications company. U-verse high
speed Internet had a record fourth-quarter net gain of 630,000
subscribers, to reach a total of 10.4 million, and a record annual
increase of 2.7 million, or 34 percent. Overall, total wireline
broadband subscribers were essentially flat in the quarter but grew year
over year. Total wireline broadband ARPU was up more than 7 percent year
over year. Total U-verse high speed Internet subscribers now represent
63 percent of all wireline broadband subscribers compared with 47
percent in the year-earlier quarter.

About 59 percent of U-verse broadband subscribers have a plan delivering
speeds up to 12 Mbps or higher. In the fourth quarter, more than
90 percent of new U-verse TV customers also signed up for U-verse high
speed Internet. About two-thirds of AT&T U-verse TV subscribers take
three or four services from AT&T. ARPU for U-verse triple-play customers
continues to be more than $170. U-verse TV penetration of customer
locations continues to grow and was at 21 percent at the end of the
fourth quarter.

Strategic Business Services Revenue Growth Accelerating. Total
revenues from business customers were $8.8 billion, down 3.4 percent
versus the year-earlier quarter, and were essentially flat from the
third quarter. Business service revenues declined 2.4 percent year over
year and were down 0.3 percent compared with the third quarter of 2013.
Overall, declines in legacy products were partially offset by continued
double-digit growth in strategic business services. Revenues from these
services, the next-generation capabilities that lead AT&T's most
advanced business solutions - including VPN, Ethernet, cloud, hosting
and other advanced IP services - grew 17.4 percent versus the
year-earlier quarter. These services represent a $9 billion annualized
revenue stream and are more than a quarter of business wireline
revenues. During the fourth quarter, the company also added 78,000
business U-verse high speed broadband subscribers.

AT&T products and services are provided or offered by subsidiaries
and affiliates of AT&T Inc. under the AT&T brand and not by AT&T Inc.

About AT&T

AT&T Inc. (NYSE:T) is a premier communications holding company and one
of the most honored companies in the world. Its subsidiaries and
affiliates - AT&T operating companies - are the providers of AT&T
services in the United States and internationally. With a powerful array
of network resources that includes the nation's most reliable 4G LTE
network, AT&T is a leading provider of wireless, Wi-Fi, high speed
Internet, voice and cloud-based services. A leader in mobile Internet,
AT&T also offers the best wireless coverage worldwide of any U.S.
carrier, offering the most wireless phones that work in the most
countries. It also offers advanced TV service with the AT&T U-verse®
brand. The company's suite of IP-based business communications services
is one of the most advanced in the world.

Information set forth in this news release contains financial
estimates and other forward-looking statements that are subject to risks
and uncertainties, and actual results may differ materially. A
discussion of factors that may affect future results is contained in
AT&T's filings with the Securities and Exchange Commission. AT&T
disclaims any obligation to update or revise statements contained in
this news release based on new information or otherwise. This news
release may contain certain non-GAAP financial measures. Reconciliations
between the non-GAAP financial measures and the GAAP financial measures
are available on the company's website at www.att.com/investor.relations.
Accompanying financial statements follow.

NOTE: EBITDA is defined as operating income before
depreciation and amortization. EBITDA differs from Segment Operating
Income (loss), as calculated in accordance with U.S. generally accepted
accounting principles (GAAP), in that it excludes depreciation and
amortization. EBITDA does not give effect to cash used for debt service
requirements and thus does not reflect available funds for
distributions, reinvestment or other discretionary uses. EBITDA is not
presented as an alternative measure of operating results or cash flows
from operations, as determined in accordance with GAAP. Our calculation
of EBITDA, as presented, may differ from similarly titled measures
reported by other companies.

NOTE: Free cash flow is defined as cash from operations minus
capital expenditures. We believe this metric provides useful information
to our investors because management regularly reviews free cash flow as
an important indicator of how much cash is generated by normal business
operations, including capital expenditures, and makes decisions based on
it. Management also views it as a measure of cash available to pay debt
and return cash to shareowners.

NOTE: Adjusted Operating Income, Adjusted Operating Expenses,
Adjusted Operating Revenues, Adjusted Operating Income Margin and
Adjusted diluted EPS are non-GAAP financial measures calculated by
excluding from operating revenues, operating expenses and equity in net
income of affiliates certain significant items that are non-operational
or non-recurring in nature, including dispositions. Management believes
that these measures provide relevant and useful information to investors
and other users of our financial data in evaluating the effectiveness of
our operations and underlying business trends.Adjusted Operating
Income, Adjusted Operating Expenses, Adjusted Operating Revenues,
Adjusted Operating Income Margin and Adjusted diluted EPS should be
considered in addition to, but not as a substitute for, other measures
of financial performance reported in accordance with GAAP. Our
calculations of Adjusted Operating Income and Adjusted diluted EPS, as
presented, may differ from similarly titled measures reported by other
companies.

Financial Data

AT&T Inc.

Consolidated Statements of Income

Dollars in millions except per share amounts

Unaudited

Three Months Ended

Twelve Months Ended

12/31/2013

12/31/2012

% Chg

12/31/2013

12/31/2012

% Chg

Operating Revenues

$

33,163

$

32,578

1.8

%

$

128,752

$

127,434

1.0

%

Operating Expenses

Cost of services and sales (exclusive of depreciation and
amortization shown separately below)

12,237

17,555

-30.3

%

51,464

55,228

-6.8

%

Selling, general and administrative

4,008

16,409

-75.6

%

28,414

41,066

-30.8

%

Depreciation and amortization

4,680

4,572

2.4

%

18,395

18,143

1.4

%

Total Operating Expenses

20,925

38,536

-45.7

%

98,273

114,437

-14.1

%

Operating Income (Loss)

12,238

(5,958

)

-

30,479

12,997

-

Interest Expense

1,459

820

77.9

%

3,940

3,444

14.4

%

Equity in Net Income of Affiliates

148

215

-31.2

%

642

752

-14.6

%

Other Income (Expense) - Net

226

12

-

596

134

-

Income (Loss) Before Income Taxes

11,153

(6,551

)

-

27,777

10,439

-

Income Tax Expense (Benefit)

4,158

(2,772

)

-

9,224

2,900

-

Net Income (Loss)

6,995

(3,779

)

-

18,553

7,539

-

Less: Net Income Attributable to Noncontrolling Interest

(82

)

(78

)

-5.1

%

(304

)

(275

)

-10.5

%

Net Income (Loss) Attributable to AT&T

$

6,913

$

(3,857

)

-

$

18,249

$

7,264

-

Basic Earnings Per Share Attributable to AT&T

$

1.31

$

(0.68

)

-

$

3.39

$

1.25

-

Weighted Average Common Shares Outstanding (000,000)

5,267

5,661

-7.0

%

5,368

5,801

-7.5

%

Diluted Earnings Per Share Attributable to AT&T

$

1.31

$

(0.68

)

-

$

3.39

$

1.25

-

Weighted Average Common Shares Outstanding with Dilution (000,000)

5,283

5,680

-7.0

%

5,385

5,821

-7.5

%

Financial Data

AT&T Inc.

Consolidated Balance Sheets

Dollars in millions

December 31,

2013

2012

Unaudited

Assets

Current Assets

Cash and cash equivalents

$

3,339

$

4,868

Accounts receivable - net of allowances for doubtful accounts of
$483 and $547

12,918

12,657

Prepaid expenses

960

1,035

Deferred income taxes

1,199

1,036

Other current assets

4,780

3,110

Total current assets

23,196

22,706

Property, Plant and Equipment - Net

110,968

109,767

Goodwill

69,273

69,773

Licenses

56,433

52,352

Customer Lists and Relationships - Net

763

1,391

Other Intangible Assets - Net

5,016

5,032

Investments in and Advances to Equity Affiliates

3,860

4,581

Other Assets

8,278

6,713

Total Assets

$

277,787

$

272,315

Liabilities and Stockholders' Equity

Current Liabilities

Debt maturing within one year

$

5,498

$

3,486

Accounts payable and accrued liabilities

21,107

20,494

Advanced billing and customer deposits

4,212

4,225

Accrued taxes

1,774

1,026

Dividends payable

2,404

2,556

Total current liabilities

34,995

31,787

Long-Term Debt

69,290

66,358

Deferred Credits and Other Noncurrent Liabilities

Deferred income taxes

36,308

28,491

Postemployment benefit obligation

29,946

41,392

Other noncurrent liabilities

15,766

11,592

Total deferred credits and other noncurrent liabilities

82,020

81,475

Stockholders' Equity

Common stock

6,495

6,495

Additional paid-in capital

91,091

91,038

Retained earnings

31,141

22,481

Treasury stock

(45,619

)

(32,888

)

Accumulated other comprehensive income

7,880

5,236

Noncontrolling interest

494

333

Total stockholders' equity

91,482

92,695

Total Liabilities and Stockholders' Equity

$

277,787

$

272,315

Financial Data

AT&T Inc.

Consolidated Statements of Cash Flows

Dollars in millions

Unaudited

Twelve Months Ended December 31,

2013

2012

Operating Activities

Net income

$

18,553

$

7,539

Adjustments to reconcile net income to net cash provided by
operating activities:

Depreciation and amortization

18,395

18,143

Undistributed earnings from investments in equity affiliates

(324

)

(615

)

Provision for uncollectible accounts

954

1,117

Deferred income tax expense

6,242

1,747

Net (gain) loss from sale of investments, net of impairments

(492

)

(19

)

Actuarial (gain) loss on pension and postretirement benefits

(7,584

)

9,994

Changes in operating assets and liabilities:

Accounts receivable

(1,329

)

(1,365

)

Other current assets

412

1,017

Accounts payable and accrued liabilities

(152

)

1,798

Retirement benefit funding

(209

)

-

Other - net

330

(180

)

Total adjustments

16,243

31,637

Net Cash Provided by Operating Activities

34,796

39,176

Investing Activities

Construction and capital expenditures:

Capital expenditures

(20,944

)

(19,465

)

Interest during construction

(284

)

(263

)

Acquisitions, net of cash acquired

(4,113

)

(828

)

Dispositions

1,923

812

Sales (purchases) of securities, net

-

65

Return of advances to and investments in equity affiliates

301

-

Other

(7

)

(1

)

Net Cash Used in Investing Activities

(23,124

)

(19,680

)

Financing Activities

Net change in short-term borrowings with original maturities of
three months or less

20

1

Issuance of other short-term borrowings

1,476

-

Repayment of other short-term borrowings

(1,476

)

-

Issuance of long-term debt

12,040

13,486

Repayment of long-term debt

(7,698

)

(8,733

)

Issuance of other long-term financing obligations

4,796

-

Purchase of treasury stock

(13,028

)

(12,752

)

Issuance of treasury stock

114

477

Dividends paid

(9,696

)

(10,241

)

Other

251

89

Net Cash Used in Financing Activities

(13,201

)

(17,673

)

Net (decrease) increase in cash and cash equivalents

(1,529

)

1,823

Cash and cash equivalents beginning of year

4,868

3,045

Cash and Cash Equivalents End of Year

$

3,339

$

4,868

Financial Data

AT&T Inc.

Statements of Segment Income

Dollars in millions

Unaudited

Three Months Ended

Twelve Months Ended

Wireless

12/31/2013

12/31/2012

% Chg

12/31/2013

12/31/2012

% Chg

Segment Operating Revenues

Data

$

5,729

$

4,905

16.8

%

$

21,719

$

18,297

18.7

%

Voice, text and other service

9,931

10,044

-1.1

%

39,833

40,889

-2.6

%

Equipment

2,777

2,693

3.1

%

8,347

7,577

10.2

%

Total Segment Operating Revenues

18,437

17,642

4.5

%

69,899

66,763

4.7

%

Segment Operating Expenses

Operations and support

12,576

13,296

-5.4

%

44,508

43,296

2.8

%

Depreciation and amortization

1,915

1,781

7.5

%

7,468

6,873

8.7

%

Total Segment Operating Expenses

14,491

15,077

-3.9

%

51,976

50,169

3.6

%

Segment Operating Income

3,946

2,565

53.8

%

17,923

16,594

8.0

%

Equity in Net Income (Loss) of Affiliates

(20

)

(17

)

-17.6

%

(75

)

(62

)

-21.0

%

Segment Income

$

3,926

$

2,548

54.1

%

$

17,848

$

16,532

8.0

%

Segment Operating Income Margin

21.4

%

14.5

%

25.6

%

24.9

%

Wireline

Segment Operating Revenues

Data

$

8,574

$

8,119

5.6

%

$

33,593

$

31,841

5.5

%

Voice

4,863

5,463

-11.0

%

20,333

22,614

-10.1

%

Other

1,279

1,341

-4.6

%

4,888

5,118

-4.5

%

Total Segment Operating Revenues

14,716

14,923

-1.4

%

58,814

59,573

-1.3

%

Segment Operating Expenses

Operations and support

10,501

10,358

1.4

%

41,638

41,207

1.0

%

Depreciation and amortization

2,761

2,775

-0.5

%

10,907

11,123

-1.9

%

Total Segment Operating Expenses

13,262

13,133

1.0

%

52,545

52,330

0.4

%

Segment Operating Income

1,454

1,790

-18.8

%

6,269

7,243

-13.4

%

Equity in Net Income (Loss) of Affiliates

1

-

-

2

(1

)

-

Segment Income

$

1,455

$

1,790

-18.7

%

$

6,271

$

7,242

-13.4

%

Segment Operating Income Margin

9.9

%

12.0

%

10.7

%

12.2

%

Advertising Solutions

Segment Operating Revenues

$

-

$

-

-

$

-

$

1,049

-

Segment Operating Expenses

Operations and support

-

-

-

-

773

-

Depreciation and amortization

-

-

-

-

106

-

Total Segment Operating Expenses

-

-

-

-

879

-

Segment Income

$

-

$

-

-

$

-

$

170

-

Segment Income Margin

-

-

-

16.2

%

Other

Segment Operating Revenues

$

10

$

13

-23.1

%

$

39

$

49

-20.4

%

Segment Operating Expenses

756

332

-

1,336

1,065

25.4

%

Segment Operating Income (Loss)

(746

)

(319

)

-

(1,297

)

(1,016

)

-27.7

%

Equity in Net Income of Affiliates

167

232

-28.0

%

715

815

-12.3

%

Segment Income (Loss)

$

(579

)

$

(87

)

-

$

(582

)

$

(201

)

-

Financial Data

AT&T Inc.

Supplementary Operating and Financial Data

Dollars in millions except per share amounts, subscribers and
connections in (000s)

Unaudited

Three Months Ended

Twelve Months Ended

12/31/2013

12/31/2012

% Chg

12/31/2013

12/31/2012

% Chg

Wireless

Subscribers and Connections

Total

110,376

106,957

3.2

%

Postpaid

72,638

70,497

3.0

%

Prepaid

7,384

7,328

0.8

%

Reseller

14,028

14,875

-5.7

%

Connected Devices

16,326

14,257

14.5

%

Wireless Net Adds

Total

809

1,094

-26.1

%

2,721

3,764

-27.7

%

Postpaid

566

780

-27.4

%

1,776

1,438

23.5

%

Prepaid

(32

)

(166

)

80.7

%

(13

)

128

-

Reseller

(123

)

234

-

(1,074

)

1,027

-

Connected Devices

398

246

61.8

%

2,032

1,171

73.5

%

M&A Activity, Partitioned Customers and Other Adjs.

107

(8

)

-

698

(54

)

-

Wireless Churn

Postpaid Churn

1.11

%

1.19

%

-8 BP

1.06

%

1.09

%

-3 BP

Total Churn

1.43

%

1.42

%

1 BP

1.37

%

1.35

%

2 BP

Other

Licensed POPs (000,000)

317

313

1.3

%

Wireline

Voice

Total Wireline Voice Connections1

28,489

32,184

-11.5

%

Net Change

(807

)

(992

)

18.6

%

(3,695

)

(4,148

)

10.9

%

Broadband

Total Wireline Broadband Connections

16,425

16,390

0.2

%

Net Change

(2

)

(2

)

-

35

(37

)

-

Video

Total U-verse Video Connections

5,460

4,536

20.4

%

Net Change

194

192

1.0

%

924

745

24.0

%

Consumer Revenue Connections

Broadband2

14,697

14,531

1.1

%

U-verse Video Connections1

5,442

4,524

20.3

%

Voice1,3

16,251

18,612

-12.7

%

Total Consumer Revenue Connections1

36,390

37,667

-3.4

%

Net Change

(273

)

(386

)

29.3

%

(1,277

)

(1,839

)

30.6

%

AT&T Inc.

Construction and capital expenditures:

Capital expenditures

$

5,379

$

5,846

-8.0

%

$

20,944

$

19,465

7.6

%

Interest during construction

$

71

$

66

7.6

%

$

284

$

263

8.0

%

Dividends Declared per Share

$

0.46

$

0.45

2.2

%

$

1.81

$

1.77

2.3

%

End of Period Common Shares Outstanding (000,000)

5,226

5,581

-6.4

%

Debt Ratio4

45.0

%

43.0

%

200 BP

Total Employees

243,360

241,810

0.6

%

1 Prior year amounts restated to conform to current
period reporting methodology.

3 Includes consumer U-verse Voice over Internet
Protocol connections of 3,848 as of December 31, 2013.

4 Total long-term debt plus debt maturing within one
year divided by total debt plus total stockholders' equity.

Note: For the end of 4Q13, total switched access lines were
24,639, retail business switched access lines totaled 10,364, and
wholesale, national mass markets and coin switched access lines
totaled 1,872. Restated switched access lines do not include ISDN
lines.

Financial Data

AT&T Inc.

Non-GAAP Wireless Reconciliation

Wireless Segment EBITDA

Dollars in millions

Unaudited

Three Months Ended

Twelve Months Ended

12/31/12

3/31/13

6/30/13

9/30/13

12/31/13

12/31/12

12/31/13

Segment Operating Revenues

Data

$

4,905

$

5,125

$

5,356

$

5,509

$

5,729

$

18,297

$

21,719

Voice, text and other service

10,044

9,937

10,014

9,951

9,931

40,889

39,833

Equipment

2,693

1,629

1,921

2,020

2,777

7,577

8,347

Total Segment Operating Revenues

17,642

16,691

17,291

17,480

18,437

66,763

69,899

Segment Operating Expenses

Operations and support

13,296

10,180

10,770

10,982

12,576

43,296

44,508

Depreciation and amortization

1,781

1,835

1,843

1,875

1,915

6,873

7,468

Total Segment Operating Expenses

15,077

12,015

12,613

12,857

14,491

50,169

51,976

Segment Operating Income

2,565

4,676

4,678

4,623

3,946

16,594

17,923

Segment Operating Income Margin

14.5

%

28.0

%

27.1

%

26.4

%

21.4

%

24.9

%

25.6

%

Plus: Depreciation and amortization

1,781

1,835

1,843

1,875

1,915

6,873

7,468

EBITDA

$

4,346

$

6,511

$

6,521

$

6,498

$

5,861

$

23,467

$

25,391

EBITDA as a % of Service Revenues1

29.1

%

43.2

%

42.4

%

42.0

%

37.4

%

40

%

41.3

%

EBITDA is defined as Operating Income Before Depreciation and
Amortization.

1 Service revenues is defined as Wireless data and
voice, text and other service revenues.

Free cash flow is defined as cash from operations minus
construction and capital expenditures. Free cash flow after
dividends is defined as cash from operations minus construction,
capital expenditures and dividends. We believe these metrics
provide useful information to our investors because management
regularly reviews free cash flow as an important indicator of how
much cash is generated by normal business operations, including
capital expenditures, and makes decisions based on it. Management
also views free cash flow as a measure of cash available to pay
debt and return cash to shareowners.

Financial Data

AT&T Inc.

Non-GAAP Consolidated Reconciliation

Net-Debt-to-Adjusted-EBITDA Ratio

Dollars in millions

Unaudited

Three Months Ended

3/31/13

6/30/13

9/30/13

12/31/13

2013

Operating Revenues

$

31,356

$

32,075

$

32,158

$

33,163

$

128,752

Operating Expenses

25,416

25,962

25,970

20,925

98,273

Total Operating Income

5,940

6,113

6,188

12,238

30,479

Add Back Depreciation and Amortization

4,529

4,571

4,615

4,680

18,395

Consolidated Reported EBITDA

10,469

10,684

10,803

16,918

48,874

Add back:

Actuarial (gain) / loss on benefit plan

(7,584

)

(7,584

)

Consolidated Adjusted EBITDA

10,469

10,684

10,803

9,334

41,290

End-of-period current debt

5,498

End-of-period long-term debt

69,290

Total End-of-Period Debt

74,788

Less Cash and Cash Equivalents

3,339

Net Debt Balance

71,449

Net-Debt-to-Adjusted-EBITDA Ratio

1.73

Net-Debt-to-EBITDA ratios are non-GAAP financial measures
frequently used by investors and credit rating agencies.
Management believes these measures provide relevant and useful
information to investors and other users of our financial data.
Net Debt is calculated by subtracting cash and cash equivalents
from the sum of debt maturing within one year and long-term debt.
The Net-Debt-to-EBITDA ratio is calculated by dividing the Net
Debt by annualized EBITDA.

Adjusted EBITDA excludes all actuarial gains or losses ($7.6
billion gain in 2013) associated with our pension and
postemployment benefit plans, which we immediately recognize in
the income statement, pursuant to our accounting policy for the
recognition of actuarial gains/losses. As a result, Adjusted
EBITDA reflects an expected return on plan assets of $4.0 billion
(based on an average expected return on plan assets of 7.75%),
rather than the actual return on plan assets of $7.2 billion
(actual return of 14.1%), as included in the GAAP measure of
income.

Our calculation of Adjusted EBITDA, as presented, may differ from
similarly titled measures reported by other companies.

Financial Data

AT&T Inc.

Non-GAAP Financial Reconciliation

Adjusted Operating Revenues, Operating Income and Margin

Dollars in millions

Unaudited

Three Months Ended

Twelve Months Ended

December 31,

December 31,

2012

2013

2012

2013

Reported Operating Revenues

$

32,578

$

33,163

$

127,434

$

128,752

Adjustments:

Removal of Advertising Solutions

-

-

(1,049

)

-

Storm Impacts

27

-

27

-

Adjusted Operating Revenues

$

32,605

$

33,163

$

126,412

$

128,752

Year-over-year growth - Adjusted

1.7

%

1.9

%

Adjusted Operating Revenues is a non-GAAP financial measure
calculated by excluding from operating revenues significant items
that are non-operational or non-recurring in nature, including
dispositions. Management believes that these measures provide
relevant and useful information to investors and other users of
our financial data in evaluating the effectiveness of our
operations and underlying business trends.

Adjusted Operating Revenues should be considered in addition to,
but not as a substitute for, other measures of financial
performance reported in accordance with GAAP. Our calculations of
Adjusted Operating Revenues may differ from similarly titled
measures reported by other companies.

Adjusted Operating Income

Dollars in millions

Unaudited

Three Months Ended

Twelve Months Ended

December 31,

December 31,

2012

2013

2012

2013

Reported Operating Income

$

(5,958

)

$

12,238

$

12,997

$

30,479

Adjustments:

Removal of Advertising Solutions

-

-

(170

)

-

Storm Impacts

176

-

176

-

Actuarial (gain) / loss on benefit plan

9,994

(7,584

)

9,994

(7,584

)

Employee separation charges

-

501

-

501

Gain on transfer of wireless spectrum

-

-

-

(229

)

Adjusted Operating Income

$

4,212

$

5,155

$

22,997

$

23,167

Year-over-year growth - Adjusted

22.4

%

0.7

%

Adjusted Operating Income Margin*

12.9

%

15.5

%

18.2

%

18.0

%

Adjusted Operating Income and Margin are non-GAAP financial
measures calculated by excluding from operating revenues and
operating expenses significant items that are non-operational or
non-recurring in nature. Management believes that these measures
provide relevant and useful information to investors and other
users of our financial data in evaluating the effectiveness of our
operations and underlying business trends.

Adjusted Operating Income and Margin exclude all actuarial gains
or losses ($7.6 billion gain in 2013) associated with our pension
and postemployment benefit plans, which we immediately recognize
in the income statement, pursuant to our accounting policy for the
recognition of actuarial gains/losses. As a result, Adjusted
Operating Income and Margin reflect an expected return on plan
assets of $4.0 billion (based on an average expected return on
plan assets of 7.75%), rather than the actual return on plan
assets of $7.2 billion (actual return of 14.1%), as included in
the GAAP measure of income.

Adjusted Operating Income and Margin should be considered in
addition to, but not as a substitute for, other measures of
financial performance reported in accordance with GAAP. Our
calculation of Adjusted Operating Income and Margin, as presented,
may differ from similarly titled measures reported by other
companies.

*Adjusted Operating Income Margin is calculated by dividing
Adjusted Operating Income by Adjusted Operating Revenues.

Financial Data

AT&T Inc.

Non-GAAP Consolidated Reconciliation

Adjusted Operating Expenses

Dollars in Millions

Unaudited

Three Months Ended

December 31,

2012

2013

Reported Operating Expenses

$

38,536

$

20,925

Adjustments:

Storm Impacts

(149

)

-

Actuarial gain / (loss) on benefit plan

(9,994

)

7,584

Employee separation charges

-

(501

)

Adjusted Operating Expenses

$

28,393

$

28,008

Year-over-year growth - Adjusted

-1.4

%

Adjusted Operating Expenses is a non-GAAP financial measure
calculated by excluding from operating expenses significant items
that are non-operational or non-recurring in nature. Management
believes that this measure provides relevant and useful
information to investors and other users of our financial data in
evaluating the effectiveness of our operations and underlying
business trends.

Adjusted Operating Expenses excludes all actuarial gains ($7.6
billion in 2013) associated with our pension and postemployment
benefit plans, which we immediately recognize in the income
statement, pursuant to our accounting policy for the recognition
of actuarial gains/losses. As a result, the Adjusted Operating
Expenses reflects an expected return on plan assets of $4.0
billion (based on an average expected return on plan assets of
7.75%), rather than the actual return on plan assets of $7.2
billion (actual return of 14.1%), as included in the GAAP measure
of income.

Adjusted Operating Expenses should be considered in addition to,
but not as a substitute for, other measures of financial
performance reported in accordance with GAAP. Our calculation of
Adjusted Operating Expenses, as presented, may differ from
similarly titled measures reported by other companies.

Financial Data

AT&T Inc.

Non-GAAP Consolidated Reconciliation

Adjusted Diluted EPS

AT&T Inc.

Unaudited

Three Months Ended

Twelve Months Ended

December 31,

December 31,

2012

2013

2012

2013

Reported Diluted EPS

$

(0.68

)

$

1.31

$

1.25

$

3.39

Adjustments:

Removal of Advertising Solutions

-

-

(0.03

)

-

Storm Impacts

0.02

-

0.02

-

Actuarial (gain) / loss on benefit plan

1.10

(0.89

)

1.07

(0.88

)

Gain on transfer of wireless spectrum

-

-

-

(0.03

)

Income tax settlement/items

-

-

-

(0.05

)

Early debt redemption costs

-

0.07

-

0.07

Employee separation charges

-

0.06

-

0.06

América Móvil - Gain from sale of shares

-

(0.02

)

-

(0.06

)

Adjusted Diluted EPS

$

0.44

$

0.53

$

2.31

$

2.50

Year-over-year growth - Adjusted

20.5

%

8.2

%

Weighted Average Common Shares Outstanding with Dilution (000,000)

5,680

5,283

5,821

5,385

Adjusted Diluted EPS is a non-GAAP financial measure calculated by
excluding from operating revenues, operating expenses and equity
in net income of affiliates certain significant items that are
non-operational or non-recurring in nature, including
dispositions. Management believes that this measure provides
relevant and useful information to investors and other users of
our financial data in evaluating the effectiveness of our
operations and underlying business trends.

Adjusted Diluted EPS should be considered in addition to, but not
as a substitute for, other measures of financial performance
reported in accordance with GAAP. Our calculation of Adjusted
Diluted EPS, as presented, may differ from similarly titled
measures reported by other companies.

EBITDA DISCUSSION

For AT&T, EBITDA is defined as operating income before depreciation and
amortization. EBITDA service margin is calculated as EBITDA divided by
service revenues. EBITDA differs from Segment Operating Income (Loss),
as calculated in accordance with U.S. generally accepted accounting
principles (GAAP), in that it excludes depreciation and amortization.
EBITDA does not give effect to cash used for debt service requirements
and thus does not reflect available funds for distributions,
reinvestment or other discretionary uses. EBITDA is not presented as an
alternative measure of operating results or cash flows from operations,
as determined in accordance with GAAP. Our calculation of EBITDA, as
presented, may differ from similarly titled measures reported by other
companies.

We believe these measures are relevant and useful information to our
investors as they are part of AT&T's internal management reporting and
planning processes and are important metrics that management uses to
evaluate the operating performance of its wireless operations. These
measures are used by management as a gauge of our success in acquiring,
retaining and servicing wireless subscribers because we believe these
measures reflect AT&T's ability to generate and grow subscriber revenues
while providing a high level of customer service in a cost-effective
manner. Management also uses these measures as a method of comparing our
Wireless segment's performance with that of many of its competitors. The
financial and operating metrics which affect EBITDA include the key
revenue and expense drivers for which AT&T Mobility's operating managers
are responsible and upon which we evaluate their performance.

EBITDA does not give effect to cash used for debt service requirements
and thus does not reflect available funds for distributions,
reinvestment or other discretionary uses. EBITDA excludes other income
(expense) - net, net income attributable to noncontrolling interest and
equity in net income (loss) of affiliates, as these do not reflect the
operating results of our wireless subscriber base and national footprint
that we utilizes to obtain and service our customers. Equity in net
income (loss) of affiliates represents AT&T Mobility's proportionate
share of the net income (loss) of affiliates in which it exercises
significant influence, but does not control. As AT&T Mobility does not
control these entities, our management excludes these results when
evaluating the performance of our primary operations. EBITDA excludes
interest expense and the provision for income taxes. Excluding these
items eliminates the expenses associated with its capitalization and tax
structures. Finally, EBITDA excludes depreciation and amortization, in
order to eliminate the impact of capital investments.

We believe EBITDA as a percentage of service revenues to be a more
relevant measure of our Wireless segment operating margin than EBITDA as
a percentage of total revenue. We generally subsidize a portion of our
wireless handset sales, all of which are recognized in the period in
which we sell the handset. Management views this equipment subsidy as a
cost to acquire or retain a subscriber, which is recovered through the
ongoing service revenue that is generated by the subscriber. We also use
wireless service revenues to calculate margin to facilitate comparison,
both internally and externally with our wireless competitors, as they
calculate their margins using wireless service revenues as well.

There are material limitations to using these non-GAAP financial
measures. EBITDA and EBITDA service margin, as we have defined them, may
not be comparable to similarly titled measures reported by other
companies. Furthermore, these performance measures do not take into
account certain significant items, including depreciation and
amortization, interest expense, tax expense and equity in net income
(loss) of affiliates, which directly affect our Wireless segment income.
Management compensates for these limitations by carefully analyzing how
its competitors present performance measures that are similar in nature
to EBITDA as we present it, and considering the economic effect of the
excluded expense items independently as well as in connection with its
analysis of net income as calculated in accordance with GAAP. EBITDA and
EBITDA service margin should be considered in addition to, but not as a
substitute for, other measures of financial performance reported in
accordance with GAAP.

FREE CASH FLOW DISCUSSION

Free cash flow is defined as cash from operations minus construction and
capital expenditures. Free cash flow after dividends is defined as cash
from operations minus construction, capital expenditures and dividends.
Free cash flow yield is defined as cash from continuing operations less
construction and capital expenditures as a percentage of market
capitalization computed on the last trading day of the quarter. Market
capitalization is computed by multiplying the end of period stock price
by the end of period shares outstanding. We believe these metrics
provide useful information to our investors because management reviews
free cash flow as an important indicator of how much cash is generated
by normal business operations, including capital expenditures, and makes
decisions based on it. Management also views it as a measure of cash
available to pay debt and return cash to shareowners.

NET DEBT TO EBITDA DISCUSSION

Net Debt to EBITDA ratios are non-GAAP financial measures frequently
used by investors and credit rating agencies and management believes
these measures provide relevant and useful information to investors and
other users of our financial data. The Net Debt to EBITDA ratio is
calculated by dividing the Net Debt by annualized EBITDA. Net Debt is
calculated by subtracting cash and cash equivalents from the sum of debt
maturing within one year and long-term debt. Annualized EBITDA is
calculated by annualizing the year-to-date EBITDA.

Adjusted EBITDA excludes net actuarial gains or losses associated with
our pension and postemployment benefit plans, which we immediately
recognize in the income statement, pursuant to our accounting policy for
the recognition of actuarial gains/losses. As a result, the Adjusted
EBITDA reflects an expected return on plan assets rather than the actual
return on plan assets, as included in the GAAP measure of income. This
measure is consistent with metrics under our existing credit agreements.

ADJUSTING ITEMS DISCUSSION

Adjusted Operating Revenues, Adjusted Operating Income, Adjusted
Operating Income Margin and Adjusted diluted EPS are non-GAAP financial
measures calculated by excluding from operating revenues, operating
expenses and income tax expense certain significant items that are
non-operational or non-recurring in nature, including dispositions.
Management believes that these measures provide relevant and useful
information to investors and other users of our financial data in
evaluating the effectiveness of our operations and underlying business
trends.

Adjusted Operating Revenues, Adjusted Operating Income, Adjusted
Operating Income Margin and Adjusted diluted EPS should be considered in
addition to, but not as a substitute for, other measures of financial
performance reported in accordance with GAAP. Our calculations of
Adjusted diluted EPS, as presented, may differ from similarly titled
measures reported by other companies.